Contact: Kinga Tihanyi
Deloitte in Hungary
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Even though the telecommunications market is well over a hundred years old, it retains its capacity for innovation, reinvention and growth. According to the predictions of Deloitte Technology, Media and Telecommunications Group (TMT), 2007 promises to be an interesting year for all those working with and for the global telecommunications sector.

Internet - slower, without PC
One of the key possibilities for the year 2007 is that the Internet could be approaching its capacity. The twin trends causing this are an explosion in demand, largely fuelled by the growth in video traffic and the lack of investment in new, functioning capacity. Bottlenecks are likely to be most apparent in the terabit-capable pipes exchanging traffic between continents, while similar capacity constraints may well appear in the telecommunications networks that provide broadband connectivity to consumers. The impact may be most noticeable in the form of the quality of service declines for a range of applications - summarizes the study of Deloitte.

The debates around the world over net neutrality look likely to continue into 2007. Advocates of net neutrality argue that any attempts prioritize traffic would undermine the fundamental freedom of the Internet: the ability of any user, anywhere in the world, to use any service, content or platform. Opponents, however, argue that their business models are undermined by bandwidth-hungry applications, particularly those with significant video content. Future growth will likely require considerable investment in new infrastructure. But infrastructure owners may recover too little of the cost to justify the investment. Legislation seems unlikely to provide a resolution in 2007, so the two sides are likely to have to seek alternative routes to agreement.

One of the principal culprits for the slowdown in growth in Internet adoption may lie with the selling and usage of PCs, typically the sole device used to access the Internet. A range of broadband appliances could be a timely decongestant in 2007, which could open up the Internet to a greater proportion of any country's population, according to Deloitte's forecast. Each appliance could undertake a range of specific, specialist tasks, from Internet radio to video-based security. Each would have a specialized user interface, more suited to their purpose than a keyboard and a mouse. These appliances would likely be cheaper than a PC, hence enabling the greater democratization of the Internet as a whole.

IPTV- Re-discovering Internet and television
2007 should see many launches of IPTV services around the world. Unfortunately, many IPTV services to date appear to have been little more than clones of traditional television offerings, without providing consumers with anything new, compelling and, critically, unique to a two-way network, as opposed to the one-way feed of broadcast satellite or terrestrial television. As a result, during 2007 network operators will need to ensure that IPTV is launched as a reinvention of television, rather than a pale imitation of current services. According to Deloitte's study, IPTV service should be positioned as an affordable way for all content providers to deliver niche media to a growing mass market.

The question of triple play / multi play can be connected to IPTV. The prevailing view in 2007, particularly in Europe, where demand for telecommunications products is perceived as stagnant, is that portfolio expansion may be one of the best options for growth and churn management. But becoming a triple or quadruple player may cause many operators to step outside their comfort zone, and some may stumble. The consequences could range from damaged brand equity to material financial loss. In 2007, operators will either have to heed such warnings, or work out how to prove them wrong.

Connectivity chasm, the possible threat
2007 will surprise not only the operators but also the governments - predicts Deloitte's research. In 2007, the concept of connectivity chasm will born and may become as well known the digital divide. There are two types of connectivity chasm. The first refers to those with and those without basic connectivity, typically used for voice services. In 2007, this chasm should diminish, as millions of new subscribers get connected every month, principally in developing countries. However, at the same time, the second connectivity chasm, referring to those with and those without access to broadband connectivity at a quality sufficient to support a widening range of applications, may well deepen.

Governments should develop policies that address both. The analysis prepared by Deloitte also provides possible answers to these. Quick fixes, such as providing free WiFi to regions where PCs are too expensive for households, should be avoided. However, simple but effective improvements may be available in the form of a simplified tax structure for phones and services, and the encouragement of fractional ownership of PCs. Longer term objectives could include greater liberalization of telecommunications markets.

According to Péter Karli, director at Deloitte Hungary, the Hungarian Internet market, thanks to the development of the past decades, has closed the previously existing gap compared with Western Europe and North America. At the same time internet penetration is still significantly lower. According to this we believe that the new technologies and applications will most probably appear on the Hungarian market. I have to add that treating broadband access chalsm is more important in Hungary, than in countries with higher penetration, said Karli.

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In Hungary, the services are provided by Deloitte Auditing and Consulting Ltd. and Deloitte Advisory and Management Consulting Private Limited Company (jointly referred to as “Deloitte Hungary”) which are affiliates of Deloitte Central Europe Holdings Limited. Deloitte Hungary is one of the leading professional services organizations in the country providing services in four professional areas — audit, tax, consulting, and financial advisory services – through over 300 national and specialized expatriate professionals. Known as an employer of choice for innovative human resources programs, it is dedicated to helping its clients and its people excel. [For more information, please visit the Deloitte website at www.deloitte.com/hungary]

 

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